October new home sales dive by half following clampdown on OTP reissue

Singapore

SALES of new private homes in October were less than half that in the month before - which analysts have put down to buyers holding back on purchases following the clampdown on the re-issuing of options to purchase (OTPs) by developers.

New private home sales in October numbered 630, said Lee Sze Teck, Huttons Asia's director of research, who had looked at caveats filed with the Urban Redevelopment Authority (URA) on Nov 10. (To be clear, the monthly sales figure may still change when the URA releases its take-up data next week.)

In September, 1,329 new private home sales were recorded, up 5.8 per cent over the 1,256 units in August. The lowest monthly sales this year were logged in February, at 277.

Consultants were expecting sales to take a hit following the Sept 28 tightening of the OTP rules to prevent market distortion.

The new conditions included:

In the past, OTP validities could be extended for up to eight weeks, or re-issued upon expiry.

The fall in sales from the tightened rules was pretty drastic. Consultants say it is a knee-jerk reaction, and that buyers are holding back to see whether developers will adjust prices.

Huttons Asia's Mr Lee said: "It's an overreaction on the ground; previously you could buy (the new place) and then sell (your existing flat). Now, ... you have to sell and wait three months for the proceeds."

Christine Sun, OrangeTee & Tie's head of research and consultancy, agreed. She thinks it will take a few months for the dust to settle, and noted that the situation was similar after the July 2018 cooling measures were implemented - buyers needed to take stock of the situation.

Nicholas Mak, ERA Realty research and consultancy head, said his observation in the first few days following the announcement of the measures was that sales in some projects slowed down. He expects buying momentum to return from buyers who are more financially capable of completing the transactions.

In some projects which had been more liberal about re-issuing OTPs, there were buyers who were able to exercise their option to buy on time, but had taken extensions on the OTP when offered them because it meant they were able to delay the drawdown on their cash; in other words, it was "free money" to them.

Consultants say the projects most affected by the tightened rules are likely those targeted at HDB upgraders. These buyers must now sell their flat first, pocket the proceeds and then rent a home while waiting for their new homes to be ready.

The curb in re-issues of OTPs from end September may also prompt buyers to look at fairly newly completed private condo units available for resale from October, said property analyst Ong Kah Seng.

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